THE BLOG
05/13/2013 12:53 pm ET Updated Jul 13, 2013

How Can We Put the Immigration System to Work for a 21st Century Economy?

For centuries, the U.S. has attracted the best and brightest immigrants. But today's system of quotas, caps and mixed priorities blocks or discourages entrepreneurs, scientists and engineers at a time when our economy needs them most. We must increase the number of skilled workers we admit each year. While we are at it, let's also change how they're selected and where they go.

Much of the debate over immigration focuses on the employment demands of large companies and a reported shortage of skilled workers in certain occupations -- the "skills gap". But two other shortages aren't getting nearly as much attention. Since the recession, we are also seeing alarming declines in entrepreneurship and innovation.

First, new business starts in the U.S. cratered during the recession, and still haven't recovered. Brand-new businesses are creating an average of 200,000 fewer jobs per quarter than they did before the recession. Immigrant entrepreneurs are uniquely suited to reverse this drop. Though they account for less than 15 percent of the population, immigrants start almost 30 percent of new businesses each year.

Second, since 2000 the U.S. share of global patents has fallen from 42 percent to 27 percent. One way to increase innovation is attracting more immigrant scientists. In some key fields, including microbiology and information-technology, more than three-quarters of patents have immigrant inventors. And one 2008 study found that not only do immigrants file patents at a higher rate than natives, they actually increase patenting by their U.S.-born colleagues.

I've seen this policy debate unfold from a unique perspective and understand what foreign talent can mean to a country. Thirty years ago I moved to Japan and then later to China where I started several companies that helped to create jobs and expand economic opportunities. The U.S. could benefit from being more open to foreign entrepreneurs who are eager to create similar opportunities here.

The recently introduced Senate immigration reform bill takes significant steps to boost entrepreneurship and innovation, including creating a new start-up visa and making it easier for scientists to get both temporary visas and green cards. But reformers must grapple with the reality that the current employment-based immigration system that is vastly out of sync with the country's economic needs.

Unlike nearly all of its competitors, the U.S. awards very few greencards (i.e. permanent visas) based on what job skills or capital an applicant can contribute to our economy. Permanent, stable immigration status gives immigrants the time and space to make the risky decision to open a business or file for a patent. That may be why every other major economy, except Japan and Switzerland, welcomes a higher number of permanent employment-based immigrants as a share of its workforce each year than the U.S.

Instead, the U.S. relies on temporary visas. Last year, we issued more than 3 temporary work visas for every 1 employment-based green card. The main visa for skilled workers, the H-1B, is issued to about 120,000 workers per year through employee sponsors.

The problem? The H-1B isn't set up to maximize the economic impact of each visa we award, or advance America's long-term competitiveness. H-1B workers aren't innovating or launching new ventures: we actually prevent them from doing so. Because companies, not the immigrants themselves, "own" the visas, H-1B workers can't leave their employers (to, say, start a new Internet company) without losing their right to stay in the country.

Quick analysis shows it is unlikely that the current crop of H-1B immigrants are filling shortages of U.S. workers. The two most-requested H-1B occupations, computer programmers and systems analysts, have seen wage growth around three percent over the last five years, about the rate of inflation. But if demand for these professions was truly outstripping supply, wages would be spiking.

A small number of companies is responsible for the majority of demand for guest H-1B workers. Almost half of H-1B applications last year came from just 13 multi-national information technology companies, each of which requested over 10,000 H-1B workers, according to U.S. Labor Department data. While H-1B workers do contribute to these companies' bottom lines, few stick around and contribute to the broader economy. Last year, the top 10 H-1B employers asked for just 3 greencards for every 100 H-1B visa requests.

Almost four years after the economy began growing again, the recovery is still coming in fits and starts. Reforms that would re-design the employment-based immigration system so that it puts our economic needs first couldn't come at a more important time.

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Robert Roche is an international businessman, philanthropist and co-founder of Business Forward. He is a former Chairman of the American Chamber of Commerce in Shanghai and former Governor of the American Chamber of Commerce in Japan. Roche has served on the U.S. Advisory Committee for Trade Policy and Negotiations since 2010.